New Home and Rental Construction

According to Sean MacKay’s column published in a recent edition of BUZZBUZZHOME.

TD Senior Economist Sri Thanabalasingam believes a “significant cool down” is coming over the next six to nine months

Earlier this month, RBC Senior Economist Robert Hogue recommended an array of policies to stabilize the market that included increasing the supply of housing through new home and rental construction, rolling out measures aimed at discouraging speculation and potentially tightening up mortgage-lending rules even beyond what was enacted by the federal government in 2018.

Here’s my analysis of the suggestions of the economists and apparent experts. While I have little doubt the rapid sale prices will cool, possibly just as dramatically, this will likely occur more as a result of political influence.

The suggestion of new construction to offset demand doesn’t make sense if you check the basic costs. From coast to coast the price of lumber has gone out of control. Have you bought a 2×4 lately?  Many builders have temporarily suspended sales while they re-evaluate costs. We have heard estimates of material costs will add 30% or more to the price of a new home. Obviously then buyers look to the pre-owned sector and what would you suggest that does to price points?

The checks and balances of cooling is a given, but another huge influence will be that those employed will soon feel the enormous burden of Covid taxes that are unavoidable and also clearly predictable. So the average earner will take home a lower percentage of their paycheque, and sellers will have to adjust expectations. The Real Estate market has always been a moving entity, but financial institutions only permit buyers to spend a percentage of their income and that percentage shrinks with their take-home pay. Fewer qualified buyers mean fewer sales.

Have a private discussion with a reputable Mortgage broker so you clearly understand your options. Consult a professional licensed Calgary Real Estate Agent at no cost, and have an open discussion on the optimum timing of buying or selling. Our decades of experience can be a solid foundation on which you can make a decision with confidence.

Author: J Hughes
Real Estate Professional with Royal LePage Benchmark